The biggest passive income myths: Imagine the gift that keeps on giving with little to no work on your behalf. A source of income that continuously brings you money with minimal effort.
The actual work merely consists of updating a few things once in a while, depending on the topic or project at hand. Other than that, you can always sit back and collect a never-ending flow of payments, or you can use that extra (free) time to work on other things at once.
Hell, you can spend your day and night sleeping – all while your income stream keeps depositing cash into your bank account.
This is the general definition of passive income: Residual payments with little or no effort on your end, even if you had put in a lot of work to make it happen in the beginning.
Sounds great on paper, sure, but what if this dream lifestyle is nothing but a myth?
Too Good to be True – Or is It?
I had been reading a very active and relatively heated forum discussion on this subject recently. It all started when a prominent member put the very idea of passive income on trial, claiming it is one of the biggest myths in internet marketing. This soon followed by various opinions which mostly agreed with the aforementioned statement. Likewise, there were other people who defended the notion that one could, in fact, live the life I so vividly described at the beginning of this blog post.
In order to understand why everyone is so divided with this topic, we have to carefully analyze both sides of the spectrum.
Project Setup & Maintenance
The primary reason some people don’t believe in passive income streams is due to the hard work we have to put into it before, during, or after building it. This includes, but is not limited to:
Brainstorming a topic: Coming up with a great idea is only the beginning, and this is the one thing that could make you or break you. Therefore, selecting the appropriate niche is a crucial step in your passive income journey.
Research: So, you have finally come up with a potentially good idea, but what happens now? You have to evaluate how profitable this project will be in the long run. Depending on the subject in question, you must perform proper keyword research, ensure that enough people are interested in your offering, measure the amount of competition out there, and/or find a way to consistently beat them and remain on top. The steps you take depend heavily on your monetinzation method (SEO, PPC, or other), but more often than not, many of these steps have to take place in some way, shape or form.
Creating Content: Putting all of your ducks in a row is only half the battle, as you must now construct the content that will become the foundation of your profits. Whether you’re building a new review-based website, a social network or a discussion forum, you must set everything up and populate it as you see fit. Let’s not forget the content style, the main visual themes and everything in between.
Generating Traffic: This is the part where most of us fail either due to laziness or a lack of knowledge and resources. Pulling traffic to a website (or any other online source) was a piece of cake a decade ago, thanks to easy SEO tricks and weak algorithms. Now, however, you must actively engage in completely different methods to draw people’s attention and retain them over a long period.
Maintenance: Once you finally perform all of the above, your pride and joy may need constant maintenance as a means of keeping your followers engaged. This may include the creation of new articles, the introduction of new products or simply the redesign of your system.
If you think about it, that’s a whole lot of work for so-called passive income!
It seems that your efforts to generate successful passive income streams have led you on a wild goose chase. Now you’ve ended up with something bigger than yourself, and you must work your ass off to maintain it.
That is, of course, assuming all of your efforts even work in the first place!
So, Passive Income is a Myth, Right?
I call that bullshit.
Here’s the truth of the matter: It all depends on the specific project or task you execute.
Before I continue, let me first say that nothing is permanently passive; there are just various maintenance levels. But the false notion that passive income streams simply don’t exist typically come from people who generalize too much. We tend to put everything in a box and classify all things as equal. The brainstorming, the research, the execution, the constant maintenance – it’s all too much!
Unless you pick the right projects, that is.
Passive Income Examples:
I started making money online back in 2007, which is considered a little late compared to the likes of many other gurus and veterans out there. Anyway, back in those days I was mainly earning through eHow.com and their WCP program. This system enabled writers to publish articles for free, but we would earn a percentage of all the daily revenue eHow made from advertisements. I personally never wrote much on the site, accumulating only about 60 articles, and each one took me an average of 20 minutes to write.
Despite not paying much attention to the site, I consistently earned anywhere from $100 to $200 month after month, even long after I had stopped writing. Just to be clear, this meant no maintenance or updating such articles with relevant keywords. Hell, I never even performed any research whatsoever, as everything came from my head.
But that was back in 2007, and I understand the World Wide Web is a completely different animal today. So let’s fast forward to 2011, when my love for Amazon and book publishing began.
Along with my own published books, I have also disclosed that a friend of mine and my own dad have a few titles out there. Let’s analyze some basic statistics about them:
Friend’s Published Books to Date: 41
Word Count per Book: 3,000 to 4,000
Work Outsourced: About 50%
Last Published Title: Over 6 months ago (as of this writing)
Average Monthly Earnings to Date: $600
Dad’s Published Books to Date: 9
Word Count per Book: 3,000 to 4,000
Work Outsourced: 0%
Last Published Title: About 10 months ago (as of this writing)
Average Monthly Earnings to Date: $100
Important Notes: The amount of published titles also represents several bundles, which means these were compilations of work that was already written. The work involved only consisted of compiling them into a single Word document, finding an image, and publishing (a one-time task.)
Their income finally started to decrease – but it happened after (roughly) 6 months since publishing their last title. This effectively shows the low maintenance required, overall, regardless of the actual amount earned.
Moreover, writing each book only took about 3 hours, plus another two hours doing minor editing and publishing.
From what I see above, I can safely say that my dad would continue to earn money for another year without breaking a sweat, even if the amount keeps decreasing over time. Here we have two people who haven’t bothered with their Amazon publishing accounts in ages. And yet, month after month they keep receiving a certain amount that pays at least one monthly bill.
The Takeaway: Will it require more maintenance to keep their sales going? Yes, there is no argument there. But let’s remember the definition of passive income; earning with little to no effort involved. Even if they were actively engaged in additional publishing, they would (theoretically) only need about one or two books per month — earning minimal amounts — and let’s not forget they could outsource them.
I decided to try one or two Made-for-AdSense (MFA) websites around 2011. I built some quick (and lazy) Blogger blogs around certain travel-related keywords, which only took me around 3 days. I then ranked them using a $5 backlinking service.
Guess what? To this day, these websites still bring me an average of $15 per month combined, even after Google’s numerous updates.
Of course that’s not a lot of money, but this discussion isn’t about amounts; that’s completely irrelevant. These sites were initially bringing me around $40 back then and they’re still bringing me some money today. The takeaway here is that I haven’t touched these sites in over two years now, and I still earn money for a few days’ worth of work. Get my point?
Although I’m trying to keep this article as factual as possible, let’s introduce a circumstantial scenario, considering it’s technically possible to achieve it.
-Let’s say you have built an Amazon review website showcasing high-ticket items, most which cost no less than $2,000 dollars.
-It took you an entire month to design it and find 3 decent (long-term) writers to write 25, one-thousand-word reviews on your behalf, at $20 per review.
-Every month you outsource two additional articles to keep the site updated. From here on out, you spend a half hour finding the item you wish to showcase, plus an additional hour publishing it once written (outsourced.) Note that it shouldn’t take you too long to find the item, because you have already selected the niche you would focus on.
Notes: So far you have worked on it for one month, spent an initial $500 in outsourcing costs, plus $40 every month afterwards (two monthly articles.) This ongoing publishing maintenance amounts to an average of 3 hours per month.
-Finally, you rely on PPC advertising and spend an average of $1 per click, with a max budget of $100 per month. That amounts to 100 highly targeted visitors visiting your website.
-Out of those 100 customers, you have an average of 3 sales per month at $2,000 per item sold. Considering Amazon starts you off at a 4% commission rate, this means you would receive $80 per sale.
– You would make $240 per month; $100 in profit after all monthly advertising and outsourcing costs. Furthermore, your income could potentially double over time if you build a mailing list in the process. In this case, creating each email sequence obviously takes work, but this work still remains minimal considering the potential you can earn as your list consistently grows.
The Takeaway: For a mere three hours of work per month, you are earning a minimum of $100. While this kind of work requires monthly maintenance, it is nevertheless low maintenance. Therefore, this effectively warrants the definition of passive income as it requires little effort on your part.
Note that the above scenario is only hypothetical and I have not personally tried it. Nevertheless, it does not mean that it’s impossible to achieve; it all depends on how convincing your website is, and how targeted your visitors are. The burden to monetize this traffic is on you, and you alone.
I completely agree with those who do not believe in passive income streams in the sense that it’s not permanently passive. In fact, you cannot expect any form of income to keep making you money indefinitely without some sort of effort on your end sooner or later. The part I strongly disagree with, however, is the notion that all things require consistent hard work. Therefore, it may be safer to also call passive income “Maintenance income” if that makes some of you feel better.
There are many, many other passive income streams out there, sources which actually work with little to no maintenance — at least for a while. We have indie book authors earning well over $1,000 from books they published several years ago, as well as product owners who are still earning some money from systems they put up in the past. Even if their monthly income decreases over time, it is still, nevertheless, passive income. It’s all about the fact that some income streams don’t necessarily die overnight or as soon as we stop working on them. And that, my friends, is the only myth about this entire discussion. So find something that works, put it into motion and kick back for a few weeks, months, or years.
What say you? Have you successfully built any passive income streams in the past? How was your experience and how long did these last before you had to heavily step in to maintain it?